Investment logic:
Yangtze River Delta scarce local leader pure thermal power target, based on thermal power to expand nuclear power. The concentration of the thermal power industry in Zhejiang Province is high, the company manages and controls half of the thermal power installation in the province, and participates in the thermal power projects of Guoneng, Datang, Huadian, China Resources and other power generation groups in Zhejiang Province. the competition pattern of the industry is better, and the possibility of quantity and price risk caused by vicious competition in the electricity market is small.
1H23 Zhejiang thermal power generation is + 8.9% year-on-year, while the company's electricity generation is + 11.3% year-on-year. Electricity growth and Zhonglai share consolidation table together support 1H23 revenue + 16.2% year-on-year. In addition, the company uses the profits generated by the main thermal power industry to reinvest nuclear power assets with higher concentration, profitability and stability in the industry, and the ROE hub is expected to rise steadily; 11M22 acquires Zhonglai shares and upgrades to the dual main business of "thermal power plus new energy manufacturing".
The inflection point of profit redistribution of coal power has appeared, and the market coal price is more flexible along the coast. Assuming that the daily output of domestic raw coal remains at the average level of 1~7M23, it is conservatively estimated that there will still be an increase of about 100 million tons this year. 1~7M23 China's cumulative import of generalized thermal coal was + 151.1% compared with the same period last year, and its share in the thermal coal supply structure increased from 2.6% in 22 years to 5.0% in the year to July this year. Market coal prices dropped sharply in May and June. The company's Changxie coal accounts for a relatively low proportion, and the new unit design coal is mainly medium-and high-calorie coal, which will fully benefit from the downward coal price in this round of market. It has also been verified that the performance of 1H23 Company has increased by 602.8% compared with the same period last year.
The problem of power shortage in Zhejiang Province is difficult to solve in the short term, and the volume and price of supply and demand support remains relatively high. The main results are as follows: (1) in terms of quantity, the installed capacity of supporting power supply is rigid in the short term, and the utilization hours of thermal power peak are maintained at a high level. In the medium and long term, the coal power installation in Zhejiang during the 14th five-year Plan is higher than expected, and it is expected that the company will have new units to be put into production every year from 23rd to 26th year. (2) in terms of price, the response is:
Considering the economic loss caused by power shortage and the upper limit of spot price of electricity, Zhejiang needs to maintain a high medium-and long-term electricity price to ensure its competitiveness in the inter-provincial market, so as to ensure the signing of sufficient medium-and long-term contracts. The average settlement price of 2021 and 1H23 of the company is + 18.4% and 1.0% respectively.
The coal price goes down + the new machine is put into production to enlarge the elasticity, and the excess ignition price difference is safe. Historically, in 2012, there was also a large influx of imported coal that led to a short-term and rapid decline in market coal prices. Driven by industry positive factors, 5~7M12 thermal power industry achieved significant excess returns. The 12M12~5M13 thermal power sector in the range of the largest 5 stocks, or due to the slow pace of 1~3Q12 performance repair, or because of coal prices in the downward cycle of new power generation capacity, so that the performance also maintained high growth in 1H13. The company Ledian's third phase of 21 million kilowatt units will be put into production before this year's peak summer will amplify the flexibility of 2H23 performance, which is in line with the above-mentioned logic.
Earnings forecasts, valuations and ratings
We estimate that the company's net profit from 2023 to 2025 will be 65.2max 79.0 / 9.34 billion yuan, respectively, and the EPS will be 0.49max 0.59max 0.70 yuan respectively. Give the company 11 times PE in 2023, corresponding to the target price of 5.39 yuan, cover for the first time, and give a "buy" rating.
Risk hint
Risks such as the progress of new projects, the downward degree of coal prices, the demand for electricity, the progress of power marketization, and the lower-than-expected performance of Zhonglai shares.